Britain's biggest retailer is applying a simple but ambitious formula to its long-term expansion plans – future growth must be green growth. Huge cuts in emissions, zero-carbon stores, greener products and carbon labelling, are all part of the package.

Retailers are used to hyper-competition. It's just a reality of the market they work in. But these days competition is not just about the daily battle for customer loyalty or pounds spent at the check out.

In the last few years the sector has really woken up to the challenges of sustainability and increasingly retailers are making important progress in tackling issues like climate change.

Tesco – as the UK's biggest retailer, with a growing presence in other key markets – has established a strong record, but is now matching that with some even more impressive targets to grow sustainably.

In the eight years to 2008 the retail giant successfully halved its energy use per sq foot of store space in the UK – no mean feat at a time of continued, relentless growth. Across the entire group, CO2 equivalent emissions were cut from 76.51 in 2005 to 54.3 in 2009.

Now, with what it calls "the boldest climate change initiative in our sector", it has signalled its intention to go much further.

A zero carbon business

The initiative – launched in 2009 – will, if successful, see Tesco become a zero-carbon business by 2050, without purchasing offsets.

On the way it intends to halve 2006 level emissions by 2020; make sure any new store built between 2006 and 2020 has half the emissions of a typical store in 2006; cut emissions from its products by 30% by 2020; and to help customers halve their own carbon footprint by the same deadline.

"They are using this data to influence consumer behaviour and attitudes to buy less carbon-intensive products, including the groundbreaking use of carbon labelling" – The Guardian judging panel

It's a low-carbon strategy which targets all of the company's impacts, whether direct or indirect, extending beyond the store portfolio to suppliers and customers as well.

Based on success to date and these far-reaching plans, the group was named top retailer in the Carbon Disclosure Project's 2010 FTSE 350 awards.

But what do these ambitions mean on the ground? They add up to a list of initiatives that are already showing results.

Take waste for instance. Since 2010 the group has sent zero waste to landfill. Logistics too have been made more efficient. By double-decking truck trailers, packing goods more efficiently, relocating distribution centres, retraining drivers and diverting freight from road to rail, the CO2 equivalent produced by each case delivered has been cut from 199g to 146g since 2005.

The retailer is also tackling the thorny issue of refrigerants, which account for a quarter of carbon emissions. Units leaking gases are being identified and fixed, while alternative systems, using natural rather than damaging hydrofluorocarbon gases, are being installed in new stores.

A template for future stores

An all-timber new look store in Ramsey, Cambridgeshire, is meanwhile creating a zero-carbon template for future store development at home and abroad.

A range of new technologies is being tested, including sun-pipe lighting, renewable combined heat and power (CHP), harvested rainwater to flush toilets and run carwashes, the first ever LED car park lighting system and on-site renewable energy production. Similar stores in the Czech Republic and Thailand will be built in the coming months.

Some 614 UK stores have also been fitted with electronic energy boards showing staff at all levels, and in real time, if their store is operating in an energy efficient way and suggesting ways to improve the results.

The Livingston distribution centre in Scotland will soon be equipped with a six megawatt CHP plant, while the California distribution centre has one of the largest roof-mounted solar installations in North America.

The bigger challenge Tesco faces, however, is in its supply chain and among its millions of customers.

Its target to cut emissions from the manufacture and use of its products by 30% by 2020 is a tough one. To tackle it Tesco is looking to work much more closely with suppliers.

A knowledge hub has been set up so that they can share ways of boosting their carbon efficiency with each other and Tesco has written to 1,000 key suppliers asking them to help identify carbon hotspots in the supply chain and to provide data and examples of best practice. The plan is to start working with specific companies and sectors to agree carbon reduction plans.

The company is also investing £25m over five years in Manchester University's sustainable consumption institute to fund research on climate change modelling, customer attitudes and supply chain innovation.

"Tesco still needs to keep pushing the boundaries as they still have a lot of work to do" – The Guardian judging panel

Tesco says that the biggest impact it can have on spreading the low-carbon message is through working with the shoppers who use its stores.

It has set up greener living, a website to guide consumers, which receives some 40,000 hits a week. Research carried out by Tesco in February 2010, showed that 37% of people visiting the site had subsequently changed their behaviour, while 27% said they had bought a green product as a result of their visit.

More importantly, perhaps, Tesco has carbon foot-printed 1,000 of its own brand products and put carbon labels on half of those, to help customers make better choices. Green clubcard points are also available on certain products, including energy saving light bulbs and home insulation.

Our panel of judges found the carbon category a hard one to assess. They described the lineup as "very strong", with an excellent range of entries and three worthy finalists. Choosing a winner was an extremely close call.

In the end they commended Tesco for producing some excellent carbon results in the last year. They also said that efforts to work with farmers and suppliers and measuring the carbon footprint of 1,000 products made this entry stand out.

Our judges also praised the work Tesco has done to help customers make more informed purchasing choices, including the groundbreaking use of carbon labels.

But the panel made it clear that Tesco still had a long way to go in meeting its ambitious plans and urged the retailer to keep pushing the boundaries. "They still have a lot of work to do and they can really build upon their successes over the last 12 months," the panel said.